Oil is rising as investors’ focus shifts to the demand outlook

Oil prices rose in Asian trading on Tuesday after the OPEC+ decision to cut further production shook markets on Monday, while investors’ attention turned to the demand outlook and the impact of higher prices on the global economy.

Brent crude futures rose 41 cents, or 0.5 percent, to $85.34 a barrel by 0400 GMT. US West Texas Intermediate crude futures also rose 41 cents, or 0.5 percent, to $80.83 a barrel.

Both benchmarks jumped more than six percent on Monday after the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, in what is known as the OPEC + alliance, shook the markets by announcing on Sunday plans to cut production targets by another 1.16 million barrels per day.

The latest pledges raise the total volume of OPEC+ cuts to 3.66 million bpd, including 2 million bpd in October, according to Reuters calculations, which is equivalent to about 3.7 percent of global demand.

OPEC+ production constraints have led most analysts to raise their forecast for Brent crude prices to around $100 a barrel by the end of the year. Goldman Sachs raised its forecast for Brent to $95 a barrel by the end of this year, and to $100 for 2024.

However, the oil alliance’s decision increased investor concerns about rising costs for businesses and consumers, fueling fears that an inflationary shock to the global economy as a result of higher oil prices could lead to further interest rate hikes.